It is not really a surprise when a celebrity makes the news after being sued; we see it happen all time. Those cases typically involve some sort of misconduct, domestic issue, or some other media-driven dispute. It is not often that we see a celebrity have to deal with an e-discovery related issue, but now we can add that to the list thanks to a recent decision of the District Court for the Southern District of New York.

In Augstein v. Leslie[1], well-known hip-hop and R&B singer/producer Ryan Leslie was sanctioned for failing to preserve a hard-drive, which allegedly contained relevant intellectual property. The issue originally started for Leslie while he was on tour in Germany, when his laptop computer and external hard drive were stolen. The laptop contained valuable intellectual property, including music and videos related to his records and performances.[2]

Through various forms of social media, Leslie stated that he would pay $20,000—later increased to $1 million—to anyone who returned his property. Soon after finding out about the reward, the Plaintiff turned over the laptop to the police, but Leslie refused to pay because the laptop no longer contained any of the intellectual property. Leslie subsequently sent the hard drive to the manufacturer, where the information was deleted prior to sending a replacement. Notably, the circumstances surrounding the communications between the manufacture and the eventual destruction of the intellectual property were disputed.[3]

The Court first addressed whether Leslie’s videos and other activities regarding the lost laptop could be characterized as an offer for a reward. In doing so, the Court found that Leslie “sought to induce performance, unlike an invitation to negotiate [often an advertisement], which seeks a reciprocal promise.”[4] Therefore, because a reasonable person would have understood that Leslie made an offer of a reward, he was required to pay the promised amount (1 million dollars) to whoever returned the laptop.[5]

The Court then addressed whether Leslie should be sanctioned for the destroyed evidence. Here, the Court stated that it is within its “inherent power” to impose sanctions upon parties who fail to preserve evidence when “the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.”[6] In the case at hand, the Court held that because the Plaintiff returned the hard drive after contacting Leslie regarding the payment, Leslie was on “notice that the information on the hard drive may be relevant to future litigation and, as a result, had an obligation to preserve that information.” [7]

In determining the level of culpability required to impose sanctions as a result of spoliation of the evidence, the Court noted that in the Second Circuit,

[t]he law in this circuit is not clear on what state of mind a party must have when destroying it. In Reilly v. Natwest Markets Group Inc., we noted that at times we have required a party to have intentionally destroyed evidence; at other times we have required action in bad faith; and at still other times we have allowed an adverse inference based on gross negligence. See Reilly v. Natwest Mkts. Group Inc., 181 F.3d 253, 267 (2d Cir.1999), cert. denied, 528 U.S. 1119, 120 S. Ct. 940, 145 L. Ed. 2d 818 (2000). In light of this, we concluded a case by case approach was appropriate.[8]

In accordance with the “case by case approach,” the Court, following precedent from the Second Circuit in Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 108 (2d Cir. 2002), which determined that negligence could constitute a culpable state of mind, concluded that because “Leslie and his team were at least negligent in their handling of the hard drive,” a sanction of an adverse inference should be imposed. More specifically, “it shall be assumed that the desired intellectual property was present on the hard drive when [the Plaintiff] returned it to the police.” [9]

If you or your company has any questions or concerns regarding litigation holds, spoliation, or any other e-discovery related questions, please e-mail Cynthia A. Augello at caugello@cullenanddykman.com or call her at (516) 357-3753.

A special thanks to Sean R. Gajewski, a law clerk at Cullen and Dykman LLP, for help with this post.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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